Question - Variable and Absorption Costing Unit Product Costs and Income Statements
Lynch Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations:
Variable costs per unit:
Manufacturing:
Direct materials $ 11
Direct labor $ 8
Variable manufacturing overhead $ 1
Variable selling and administrative $ 1
Fixed costs per year:
Fixed manufacturing overhead$ 420,000
Required: 1. Assume that the company uses absorption casting:
a. Compute the unit product cost.
b. Prepare an income statement for the year.
2. Assume that the company uses variable casting:
a. Compute the unit product cost.
b. Prepare an income statement for the year.